tv The Profit CNBC March 10, 2014 10:00pm-11:01pm EDT
>> tonight on the profit... good morning, i'm marcus. >> nice meeting you. >> i go inside a. stein meat products, a wholesale meat supplier in brooklyn, new york, that does $50 million of revenue annually. >> good burger. >> it's the best. due to high operating costs and razor-thin margins, stein is hemorrhaging cash. >> everybody you order from, wants their money in ten days. we don't have the money to pay them. >> i can't turn this business around... this business is two weeks away from closing. this 75-year-old company will close for good. my name is marcus lemonis. i fix failing businesses. i make tough decisions. and, frank, you are no longer the general manager. and i back them up with my own cash. it's not always pretty. >> perfect flavor.
>> but this is business. [bleep] is gonna change. i do it save jobs... check you out. and i do it to make money. this the profit. [upbeat music] ♪ [truck beeping] >> watch your back. >> a. stein meat products is a prime beef wholesale business in brooklyn, new york. for 75 years, they've been selling quality meats to new york's finest restaurants and butcher shops... >> that's beautiful. >> and shipping their product all over the country. >> we carry a lot of choice and prime meat. we only carry a high-end product. >> howard mora... >> i also need about 20 prime loins. >> and alan buxbaum... >> what are you waiting for? >> are sons of the original two founders. together, they now run stein meats. and over the last 18 years, they've grown their revenue from $4 million to $50 million annually. >> when our fathers first started, it was much smaller. it really expanded the business.
>> meat is a competitive business. and sellers like stein work on a very low profit margin. >> meat's priced like the stock exchange. you sell stuff for pennies a pound over your cost. >> and even with $50 million in revenue last year, stein is still struggling to make a profit. >> um, we still have a balance of 2,300. >> last year, stein meat showed a loss of over $400,000. >> we're losing money. >> it's been pretty tough over the last couple years. >> if the losses continue, stein meats will be forced to close its doors in the very near future. without some major adjustments, 47 stein meats employees will be out of work, and alan and howard will lose everything they've worked so hard to build. >> i'm scared that this business will close. i don't wanna see this disappear. it's been my whole life. we don't wanna fail. >> stein meats sells a great product, and they generate over $50 million of revenue. i'm positive with some tweaks, i can find a way to turn
a profit. >> good morning. >> sir, we're going to stein meats in brooklyn, please. good morning, i'm marcus. >> marcus, how are you? tony. nice to meet you. >> tony, nice to meet you. >> nice to meet you. >> a lot going on this morning. >> yeah, there's quite a bit going on. this is when our usual action happens. >> and where--where is all this going? >> restaurants, butcher shops, diners. >> how long have you been here? >> i've been here for 24 years. >> 24, that's it? >> yeah, that's it. >> oh, my gosh. can you show me around? >> absolutely. but before you go in, you need a hairnet, a hat, and a white coat. >> okay. so what do you do here? >> i'm one of the foremen here. >> let's head in and check it out. >> okay, let's go. come on in. this is where it happens.
>> wow. wow, wow, wow. >> this is our beef department, all the hanging beef. how about i get howard and alan down here? they'll really give you a good tour. marcus is here. >> nice meeting you, pleasure. >> nice to meet you. you got a nice operation. >> thank you. >> do you love it? >> after 40 years, i have to love it. >> you better love it. >> i don't have a choice anymore. >> so are you alan? how are you? i'm marcus. >> good. how are you, marcus? >> nice to meet you, sir. >> pleasure to meet you. >> this is a nice place. now are you guys brothers? >> no. partners. >> just partners. >> closer than brothers. >> and are you guys 50/50 partners? >> 50/50. our fathers were partners. >> okay. >> they left the empire to us. >> and so, walk me through the process of how it works. >> this is the receiving area. we got all our fresh meat through here. then we also get lamb and veal in this way too. and those cuts will go into the other room next door, where they'll be broken down into subprimals. they'll be packaged or shipped out as orders. >> so how much revenue will you do a year?
>> uh, we should do about 50. >> 50 million? >> 50 million. >> that's a big business. how big is that electric bill? >> uh, about 30 a month. >> wow. a big business like this comes with big overhead. how much is your rent? >> about 32,000 a month. >> wow. there's rent and cooling cost averaging over 60,000 a month. there's union labor costs. there's seven delivery trucks. that's a lot of money being spent. but there's $50 million of revenue coming in, so i'm a bit baffled by the annual losses. this is almost a $50 million business, how much do you think you'll lose this year? >> about 400,000. >> how much is inventory at one given time? >> probably between 800,000 and 900,000. >> how much leaves here a day? >> 150,000 to 200,000. >> you're turning your inventory pretty quick. >> right. >> and so do you guys have any debt? >> right now our bank is lending us about $3 1/2 million. the fabricating room, where we cut up, make the orders, process
the meat. >> hey, david, i got that order for wolfgang's. i need 40 short loins as soon as possible. corey, i need three boxes of our boneless legs of lamb. >> who's this guy? >> that's frank, our general manager. >> come on, we gotta get these trucks out of here. let's go. >> he seems to know what he's doing. >> yes, he does. >> frank. >> frank, i'm marcus. >> hey, marcus, how you doing? >> both: nice to meet you. >> how long have you been here? >> five years. >> do you love it? >> yeah, it's good business. you know, everybody's gotta eat. [chuckles] >> uh-huh. do you mind giving me kind of-- we could walk through, give me kind of a rundown of what goes on here. >> well, this is our production room. we fabricate orders. >> how do you measure the efficiency? >> uh, i've never really analyzed it, never thought about it. i just look and see what i can get done in a given day. >> and so how many pounds do we generate a day? >> um-- >> do you know that number? >> no, i don't. >> so what other things could
you guys do here to generate some money? >> well, we started a new item. we made the brooklyn burger. it's a brand-new item. the conception of it was from-- some of the prime meat products that we don't get the top dollar for, make an excellent hamburger. >> so it something you sell to butcher shops or restaurants? how does it--how does it work? >> we sell it to the sports stadiums. we're the official hamburger of the new york yankees, the new york mets... >> oh. >> the brooklyn nets. >> and how does that work? you have, like--like, a marketing arrangement or-- >> uh, corporate sponsorship agreement with the teams. >> and how much does that cost a year? >> about 400,000 a year. >> oh, wow. 400,000 is a lot of money to spend marketing one product, especially only three locations. i'm gonna have to take a look at these contracts and make sure i know what we're getting for that. what i'd like to see is how the brooklyn burger is made. >> cut the meat here. now i don't know if you wanted to try cutting a piece of meat. >> well, i'd like to try it. i wanna learn. i'll stand over here, okay? and break it up into what? >> three pieces is fine. >> just watch your fingers. >> aah.
>> [chuckles] >> it's all solid muscle. >> brooklyn burgers only accounts for about $1 million in sales. and it's sold at three major sports venues as the premium burger. so it could be a great stepping stone for something big, like getting into grocery stores around the country. the brooklyn burger could be our golden goose. you know, what i love about it is the color. it really looks so fresh. >> perfect flavor. [indistinct chatter] >> oh, it puts the paper and everything. i think the brooklyn burger concept is a real winner, with a very efficient manufacturing process. you put that together with the brooklyn name, what a great way to market a product. >> you remember the lucy show with all the chocolate going by? >> holy crap. [laughter] [phone ringing] >> good morning. stein. sure. who's calling? >> look, these guys know meat, and they sell one heck of a product. but they're a little shaky on the numbers. i wanna head up to accounting and meat the people that
actually put the numbers together. i'm marcus. >> donna. nice to meet you. >> how are you, donna? >> good. thank you. >> what do you do here? are you in charge? >> i'm the office manager. i oversee the accounts payable, the accounts receivable, enter invoices. >> so do you have anything to do with accounting? >> no, howard and alan take care of that, or attempt to, or try to, whatever. >> so, i'll ask howard and alan later, how they handle the books. and how long have you been here? >> 20 years. >> you're the one that contacted me, right, to come here? >> i am. >> what was your motivation? >> it needs a whole overhaul. i mean-- >> what are the things that just eat at you? >> um, absolutely the receivables. customers pay late. there's a lot of money out there. >> so the money that the customers owe us, those are the receivables? >> correct. >> how much is our total receivables right now? a couple hundred thousand? >> we have almost 4 million on the streets. >> are you kidding me? business that generates $200,000 a day in sales, $50 million a year, can expect to have a certain amount of receivables. but $4 million in uncollected
funds? that's totally unacceptable. and how much of it is old? >> 1.1 million. >> is any of it really old? >> some could be well over two years old. >> you're not gonna see that again. >> no. >> of the $4 million of receivables, $1 million is at risk? >> yeah. >> okay. all right. i'm gonna go chat with them. thanks, donna. >> you're welcome. >> so i got the receivables list. there's $4 million of receivables. but i think what's more alarming is of the $4 million, of the money the customers owe us, $1 million of it is over a month old. >> both: we know that. >> that's your--that's the best response you got? >> well, a lot of them have been paying those down. >> but i saw a couple on here that were huge. like, [bleep] meats, 50,000? >> well, he had a problem with his family. and he's paying medical bills now. >> [bleep] packing. 117,000? >> he's a little slow, a lot
slow. he buys every week. >> but they're still a customer of yours? >> yes. >> why would you still sell to people that owe you that much money? $117,000 this guy owes you. whew. i don't know if these guys are the nicest guys in the world, or the most irresponsible. look, i understand trying to help other people. but if they don't take care of themselves, they're gonna be out of business. there are hundreds of thousands of dollars of receivables that are associated with businesses that are either closed or the accounts are dead. i should apply for a loan with you guys. you wanna know why? i don't ever have to pay it back. not collecting payment from the customers that buy their product is gonna lead to serious cash flow problems. they have millions of dollars tied up in i-owe-yous. you can't pay bills with i-owe-yous. how much do we owe in payables to our vendors? how much is that, approximately? >> probably about 2 million. >> and how much of that is past due, by your definition? >> probably about 1/2 million. >> i'll see you guys in a little bit, okay? >> okay.
>> i'm shocked at what i'm seeing in stein. stein's assets consist of less than $1 million of inventory on the floor, and $4 million of receivables, of which $1 million is past due, and maybe not even collectible. stein's total liabilities are made of a $3 1/2 million bank loan that they use to fund expenses and make up for receivables that they don't collect, and about $2 million in outstanding payables that are owed to companies they buy meat from. right now, stein owes more money than it has, by about $1/2 million. is it scary that-- >> oh, absolutely. i-i see the bills, and it's like, well, i don't know-- i don't know how much longer we're gonna be here. >> do you feel like you guys are pretty close to that? are you scared about that? >> i am, because i was selling my house and purchasing another house. and i told my husband, "let's not do it now." i was too afraid to do it, just because i didn't wanna not have a paycheck or worry about it.
the girls live paycheck to paycheck. i'm married. i've married a long time. i have a husband. i'll be okay. but these girls live paycheck to paycheck. i said, if something happens-- i'm like, one's buying a car, and, like, i just wanted to tell her, "don't buy the car." because if something happens, she has two kids, and now she has a car payment. if you can't get a job-- >> the situation at stein is far more dire than alan and howard think it is. it doesn't even look like there's any relief in sight. and if i don't get involved, and not only put some money in, but force them to make some cuts, there is no way this business is gonna make it. i know i can help, but it's gonna take a lot of changes in order for this business to really make it. hey, guys. >> hello. >> how are you? good to see you.
so we decided to meet at peter luger's steak house, one of the best steak houses in america, and also one of stein's biggest customers. this steak is ridiculous. >> [chuckles] >> when you think about credibility, i think being in a place like this-- i think it says a lot about the quality of your business. but you guys have heard me talk about people, process, and product. i know that there's great people. the product--i don't know that i've had a better steak. and i'm not telling you that because i wanna make you feel good. if i didn't like it, i'd tell ya. but the last part is that the process is broken. you're in a competitive business. it's a commodity, very thin margins. if you don't collect the receivables, your business is wildly vulnerable. your employees, they're all scared. you know that, right? do you have a fear that you guys could lose it all? >> yes, i do. there are night that i don't sleep.
we're in a desperate situation. i'm scared that this business will close, after it's been a family business for over 75 years. we wanna survive. >> so what is the number that you guys want, and what can i have for it? >> we were actually discussing a $5 million input into the business. >> uh-huh, and what's the share of the business? >> a 1/3 share. >> did you calculate a break? how'd you come up with that? >> i--not through any math or anything that we did. >> obviously. because the business loses money today. it sells a lot, you just don't make anything. >> well, i think that-- >> i'm not doing a deal for less than 50%. i can tell you that right now. because i think the business needs so much lifting and so much capital to dig itself out of a $1/2 million hole and $2 million of payables.
if you don't do a deal with somebody, you're gonna own 100% of nothing. my offer is $1 million to provide working capital for the business, and bring the payables into an acceptable range. the percentage that i own will be 50%. [tense music] ♪ >> um-- >> coming up... you doing okay? you look a little stressed. >> i really have a lot of thoughts that i just wanna quit. >> and later... all these people out here that are scared to buy a car, because they're scared they're gonna lose their job, well, they have a reason to be scared. because this business is two weeks away from closing. i'm beth...
and i'm michelle. and we own the paper cottage. it's a stationery and gifts store. anything we purchase for the paper cottage goes on our ink card. so you can manage your business expenses and access them online instantly with the game changing app from ink. we didn't get into business to spend time managing receipts, that's why we have ink. we like being in business because we like being creative, we like interacting with people. so you have time to focus on the things you love. ink from chase. so you can.
♪ for tapping into a wealth of experience. ♪ for access to one of the top wealth management firms in the country. ♪ for a team of financial professionals who provide customized solutions. for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more.
>> my offer is $1 million to provide working capital for the business, and bring the payables into an acceptable range. the percentage that i own will be 50%. [tense music] ♪ >> um-- >> these guys were actually expecting a bigger offer. i thought my offer was plenty generous. they're losing money every month. they're $1/2 million in the hole. my paid-in capital was gonna solve all those problems. >> could we have a minute?
>> yeah, you can have a minute. if we can get on the right path, all of us will make a lot of money. >> the way i feel, i mean, we still have a $50 million business. yes, it's poorly run. and that's where we need the direction. >> let's see if we can counteroffer. >> 4 million? >> so what do you guys think? >> we decided we would do the deal at 4 million. >> no. alan and howard, this is-- we're here. if those receivables and those payables don't start matching up, you will not be in business in the next year. i am not writing a check for more than a million bucks. do we have a deal? >> yeah. >> yes. >> come here, you big guy. >> we came from 5 million down to the 1, to be more realistic.
>> i'm very comfortable with the million dollars, especially with everything that he's going to add to the business. >> see ya in the morning. good morning. my name is marcus lemonis. and i fix failing businesses. this business last year did $50 million of business. unfortunately, we didn't make any money. you guys sell a lot, but there's one thing that you don't do very well. what is that? >> collect. >> collect money. so last night at dinner, i made a deal with alan and howard. and i'm putting in a million dollars. but you know what they forgot to do last night? they forgot to ask me for my money. it's a theme, but it's not funny. because your paychecks and the rent, all get paid when we collect the money, not when the stuff leaves on the truck. there's the money.
>> thank you. >> thank you. [applause] >> from this point forward, i'm in charge. the first thing we're gonna do is fix the accounts receivable process, so that i know for sure what meats coming in and what meat's going out. i wanna know how much we're selling, how much we're collecting, and who owes what. we're gonna start by getting on the phone, and calling these customers that owe us money. we need to be paid. and from now on, when we deliver meat, we need to get paid on time. we are not a bank. we need to improve our operating efficiency, and there will be no more wasteful spending. we're gonna look under every rock and we're gonna cut costs. that will free up cash. $50 million is a lot, but it's not enough. we have to make more money, 'cause we're gonna change the marketing strategy. we've invested a lot of money building this "brooklyn burger" brand. it's got a lot of brand value. and we're gonna get behind that name. and we're gonna try to figure out how to make the brooklyn burger work. we're gonna try to get into groceries, and get the value out of what i think is one of
the greatest places in this country, which is brooklyn. guys, now that we've made the deal, i wanna find out how much money we can actually recover. so i wanna get upstairs. i wanna get on those phones with a lot of intensity, and collect some of this money. okay? all right, let's go to work. [applause] [phone line ringing] >> manager speaking. >> hi, this is donna at stein meat. we still have a balance of 2,300. >> well, i'm sorry, but somebody from billing is gonna have to get back to you. >> okay. >> this is ira from stein. >> uh, let me call you back. >> bye. not in. [dial tone beeping] [phone dialing] he's not in? >> there's an old balance, 60 days today. >> i just don't have it right now. [phone chimes] >> the number you've dialed is not in service. >> they're out of business. [phones beeping] i can't believe how difficult this is. we can hardly get anyone on the phone, let alone collect money.
andy, i have on the balance over 210,000. >> i'll try to straighten it out. >> okay. >> is that all right with you? >> okay, wait. you'll give me extra checks, or you'll-- >> come by tomorrow, and i could try to have a check for you for, like, 5 grand. >> okay, perfect. >> okay. >> all right, andy, i appreciate it. >> bye. >> thank you, bye. >> look, when you're in this much debt, collecting some money is better than collecting no money. >> i can give you about half. >> all right, thanks. everyone on the team clearly understands the importance of collecting this money, except for frank, who has absolutely no sense of urgency. he's kind of just hiding in the back office. hey, frank, can i talk to you for a second? >> yes. >> why are you the only one not making calls? >> should i? >> you have to chase the money as if it's yours, and i don't feel like you're doing that. >> okay. >> so get on the phone and start collecting some money. >> okay. >> all right, thank you. >> not a problem. >> i could get you about 10 grand midweek, if you want. >> okay, wonderful. all right. >> hello, kumail? >> hey.
>> how you doing? this is frank over at stein meat. i was just going over your account. still a little bit past due. do you have another check coming out to me? >> uh, why don't you check back with in a couple of weeks? >> not a problem. thank you very much. hey, marcus. >> you know, we just got through talking about the urgency of those calls. and then i'm listening to you tell some guy he can pay you in a couple weeks. i need to know that if you're gonna be here, if you're gonna run this business, you're gonna have the same level of intensity as me. you understand that? >> yes, i understand what you're saying. >> the severity of it? >> yes. >> okay. >> if you wanna do the brooklyn burger, you can also buy the sliders. you've never had sliders on your menu, and i think you should try sliders. >> yeah, all right, i go ahead and throw a couple in. >> bye. i got my first sale. >> check you out. >> they hadn't been bought in five weeks. >> selling, collecting, you're doing it all. >> hey, kelly, it's frank over at stein meat. i need two case of 18 by 20 and two case of 14 by 24 bone guard. p.o. number is 986822.
thank you very much. >> i hear frank on the phone, ordering a whole list of items. all purchase orders are supposed to go through me for approval. it's the only way we have right now to manage spending. and he doesn't know if we have the money for this or not. what are you ordering? >> plastic bags. >> you have to get an authorization for payment. >> no, this is something i do all the time. whenever i see my inventory running low, i get the guys to give me the inventory, and then i order what i need. >> i have to get an authorization. >> and, frank, as the general manager, you have to know that cash is a finite resource. we just don't have a lot of it. so donna's gotta know all the money that's coming in and all the money that's going out. as the general manager, you gotta know that. frank is showing some signs of being unqualified at being a general manager. there are things that he should know that he just simply doesn't know. >> that's what we'll do from now on, not a problem. >> hi. >> hey. >> how are you? let me just close the door. so, guys, i need you to get my mind wrapped around frank being the general manager here. help me understand why you think he's the right person to be second in charge.
you know, he's not necessarily the way he should be. i'm watching him argue with donna. i'm not convinced. >> he runs the show downstairs. >> yeah, here's the problem that i have. i-i have general managers all over the country. and i want them to be able to run the entire business. which means understanding things like work flow and cash flow. and i don't sense that from him. coming up... >> frank, no one knew you ordered this. you're supposed to give me the p.o.s. what are you missing? >> you look a little stressed. >> i'm tired of frank. >> that [bleep]'s gonna stop.
ameriprise asked people a simple question: can you keep your lifestyle in retirement? i don't want to think about the alternative. i don't even know how to answer that. i mean, no one knows how long their money is going to last. i try not to worry, but you worry. what happens when your paychecks stop? because everyone has retirement questions. ameriprise created the exclusive confident retirement approach.
to get the real answers you need. start building your confident retirement today. peace of mind is important when you're running a business. century link provides reliable it services like multi-layered security solution to keep your information safe & secure. century link. your link with what's next. phone: your account is already your lipaid in full.s next. oh, well in that case, back to vacation mode. ♪boots and pants and boots and pants♪ ♪and boots and pants and boots and pants♪ ♪and boots and pants... voice-enabled bill pay. just a tap away on the geico app. ♪ huh, 15 minutes could save you 15% or more on car insurance. yup, everybody knows that. well, did you know that some owls aren't that wise.
don't forget about i'm having brunch with meagan tomorrow. who? seriously, you met her like three times. who? geico. >> let's start moving the tables down. and then if we can move this over-- >> there's a number of key things that we need to do to improve the process, which ultimately improves profitability. the first thing we need to do is shrink the floor space. i can save at least $5,000 a month, $60,000 a year. >> well, put it this way. >> put it that way? >> yeah, it can't go that way. go down more. >> we also need to reconfigure all the equipment, so we can maximize production. >> but now it's going to flow. it's gonna flow from that side into here, and around into the packaging area that'll be over here, and then out the door. at least 25 to 30% more efficient. >> more production. >> definitely more production. >> okay, guys. i wanted to show you guys a few things. while we're cutting costs, recovering money, and building more efficiencies, i wanna stay focused on growing the business.
and i think brooklyn burgers just might be our secret weapon. with new packaging, i think we can sell a lot of units at retail stores. >> i like it. >> i don't know if you guys heard or not, but this is the official burger of new york. you wanna know why? 'cause there is no category. who do i have to ask permission for for that? >> no one. >> who do i have to pay? >> both: no one. >> happens to have the same colors as the barclays center. happens to have the same colors as the dodgers, on purpose. this is a marketing plan. >> i like that. >> i think the retail stores would be happy. >> all right, guys. i'm gonna run. buh-bye. [whistle blows] [cheers and applause] i'm at the barclays center in brooklyn with alan at a basketball game. howard and alan are paying $400,000 a year to be the official burger of the mets, the nets, and the yankees. the brooklyn nets alone, which is at the barclays center, is $180,000 all by itself.
>> good burger. >> it's the best. i wanna see for myself if these contracts are actually a good investment. it says "brooklyn burger cheeseburger." >> both: "barclays signature prime beef." >> that's not barclays signature beef. >> it's ours. >> did you see that before? >> no. >> but see, these are the details that matter. we're spending $180,000 a year. as i walk around the stadium, i don't even see $18,000 worth of value. i see the batchagaloop burger. >> it's made with a brooklyn burger-- >> so they have a burger in here that's not called the brooklyn burger? that's a problem, right? the sports contracts that we have don't justify any sort of investment. i've made the decision to terminate all of the sports contracts, and save over $400,000 a year. we're gonna focus on selling these burgers in grocery stores around the country. look, i'm as enamored as you are by the glitz and the glam and the logos and all the fun stuff
that goes with it. but at the end of the day, it's a business decision, right? >> correct. >> so it just doesn't-- although nice, the economics just don't work. >> and who gave you the p.o.? okay, let me check with frank and i'll get back to you. okay, bye. frank? >> yeah? >> you're still giving your own purchase order. you're approving your own purchase, and giving your own purchase order. >> right. >> for instance, this day, no one knew you ordered this. >> then i will not purchase any more beef items, then. that's the way i-- if allowed to purchase only supplies, then i'll only purchase supplies. >> i still need to see it. you can't just-- you're still missing the point. you cannot just pick up the phone and say, "so and so, i need 10,000 plastic bags. here's my p.o. number." no, you need to check with somebody, and say, "is it okay that we purchase these 10,000?"
and then that somebody is going to give you a p.o. do you pay the bills here? >> no, i don't. >> okay. everybody you order from wants their money in ten days. we don't have the money to pay them. >> but when i need bags or bulk boxes, i'm-- >> you need to get an approval. >> so then how would you want me to do this? >> you're supposed to give me the p.o.s. what are you missing? >> so either i need to either look through those bills or-- >> you're not looking through the bills. you're not-- again, you're missing my point. you can't give your own p.o. out. >> okay, fine. that's fine. >> how's that? >> that's fine. >> point-blank, you aren't entitled to give your p.o. out. that's it, case closed. >> okay, no problem. >> okay? >> no problem, no problem. >> [whispers] i don't know what to do. >> donna? you doing okay? you look a little stressed. >> i don't know how much more of this i can take. i'm tired of frank. i personally feel i do more work than he does. and i feel like i don't wanna be here. i'm feeling that i really have a lot of thoughts that i just want to quit.
my husband said, "why don't you just quit? why don't you just quit?" it's something he's been telling me for two years now. it's not something he's been telling me-- but i feel like-- >> well, i'm gonna fix that today. donna is one of the only reasons this business is still afloat. and if they don't keep her here and keep her happy, they're screwed. do you think that those guys know that if it wasn't for you, i wouldn't be here? >> no. >> okay, well, that [bleep]'s gonna stop. >> all right. >> come with me, donna. i wanted to talk to the two of you guys. and i had donna come in. you can have a seat, donna. she's upset. she doesn't wanna work here anymore. what exactly has been happening that led you to this point of feeling this way? >> i don't feel respected. i don't feel you take me seriously. >> for her to want to quit after 20 years-- you know why she's comfortable saying it? because she feels like she's got nothing to lose. [bleep] is gonna change. i'm a big believer in having the right people in the right job. so, donna, i'm gonna make sure this gets fixed. can you give us a minute... >> sure. >> and send frank in?
>> sure. frank, you're up. >> frank is not the general manager. >> he's more of a manager downstairs. i don't think he's a manager up here in the office. >> that's the reality of it. hey, frank, can you have a seat? >> sure. >> frank, you are no longer the general manager. [intense music] ♪ coming up... >> i really need to talk to you about what i'm seeing in the company's financials. i would run. >> wow. i'm beth... and i'm michelle. and we own the paper cottage. it's a stationery and gifts store. anything we purchase for the paper cottage goes on our ink card. so you can manage your business expenses and access them online instantly with the game changing app from ink.
we still run into problems. that's why liberty mutual insurance offers accident forgiveness if you qualify, and new car replacement, standard with our auto policies. so call liberty mutual at... today. and if you switch, you could save up to $423. liberty mutual insurance. responsibility. what's your policy?
>> frank, you are no longer the general manager. you can be a part of the team. but the way i see it and the way the bank sees it, is that you guys are really the general manager. you're the floor manager. in addition, you have to take a pay cut. i want you to be here, but you have to earn it. and you have to prove it to them and you have to prove it to me. >> i'm onboard. >> i appreciate you being open-minded about it, okay? >> not a problem.
>> well, i brought you to brooklyn. >> [laughs] hi. >> both: how are you? >> whenever i invest in a company, especially one the size of stein, it's standard practice for me to bring somebody to come in an analyze the financials. so i've flown in jamie, an accounting expert, to do an audit and to validate the numbers. >> hi, nice to meet you. >> same here. >> jamie is a portfolio manager for me. the reason that she came out is really to dig into the books. and anything that she wants, just give it to her. >> okay. >> great, thank you. >> no problem. this is the open payables. >> so when you receive the invoices, it goes on this list? >> no. >> so does this break out how much you're paying in payroll? >> [scoffs] >> no? does it interface into your system? no? do you have an aging of your payables? no?
>> i checked in with jamie, and she told me she wanted to speak to me privately. right then, i knew that there was a problem. >> i really need to talk to you about what i'm seeing in the company's financials. >> okay. >> their payables are about $3.8 million. >> that's several million more that i thought it was. the numbers that jamie's giving me now are dramatically different than the numbers that i was given when i made the deal. they told me the total amount they own to meat suppliers is 2 million. it's actually 3.8 million. >> their bank loan is $4 million and completely tapped. >> jamie found an additional $500,000 on the bank loan, which means that stein is actually obligated to pay back 7.8 million, not 5.5 million. >> the bank wants to end the relationship immediately. >> to make matters even worse, that $4 million is the bank's limit. and they're demanding payment on that loan. >> they have no cash. and we have about 30,000 of cash to cover the expenses. honestly, i don't know how they're making payroll on
a weekly basis. >> i mean, this business is insolvent. >> they're almost bankrupt. >> depending on how much they can collect of their receivables, their total assets are no more than 5 million. because their total liabilities are almost $8 million, the level of insolvency they have isn't $500,000, it's nearly $3 million. that's six times what i thought i was signing up for. >> it's almost financially impossible to figure out how they're gonna be in business 10 to 14 days. >> wow. >> i would run. [indistinct chatter] >> hey, guys, we gotta talk. we got a problem. i just got through talking with jamie. and there's a $3 million hole that you can't explain. and you have $30,000 in the bank. are you guys aware of that? >> we had no idea. i knew the bank account was low, but i didn't know the gap was that large. did you? >> i didn't think it was 3 million.
>> the deal that we made was based on 2 million payables, not 4 million, right? >> right. >> i mean, this puts us in a very precarious position. >> guys, this is bad. all these people out here that are scared to buy a car, because they're scared they're gonna lose their job, well, they have a reason to be scared. because this business is two weeks away from closing. >> i know it doesn't look good. i don't want you to think that we knew it and we're hiding something from you. this is new to us also. >> things are way worse than you think they are. >> where do we go from here? >> you said to me that you thought the business was worth 15 million. to me, i think it's worth 15 bucks. it's frustrating. and i've lost confidence. from a business standpoint, right now, i don't think this is a good investment for me. i need some time to think about this. if your business is in trouble and you need my help, log on
what if i suddenly have to go? what if? but what if the most important question is the one you're not asking? what if the underlying cause of your symptoms is damaging inflammation? for help getting the answers you need, talk to your doctor and visit crohnsandcolitisadvocates.com to connect with a patient advocate from abbvie for one-to-one support and education. oh, there's a prize, all right. [ male announcer ] inside every box of cheerios are those great-tasting little o's made from carefully selected oats that can help lower cholesterol. is it a superhero? kinda. ♪
. kinda. time to take care of business with century link's global broadband network and cloud infrastructure. we constantly evolve to meet your needs every day of the week. no two people have the same financial goals. pnc investments works with you to understand yours and helps plan for your retirement. talk to a pnc investments financial advisor today. ♪
>> we're in a much more desperate situation than we thought we were. i mean, we've been together almost 40 years. and for it to come down to this, we have to do something. we have bills to be paid, payroll to be met. i don't know what we're gonna do now, without him. >> we should've been watching it more carefully. >> it's gonna be-- >> both: scary. >> it's a scary situation. i hope we can work something out. >> with what i just learned, i realized that i have some real thinking to do. if i go through with this deal, i don't know how big the hole is. i don't know if i'll ever get my money back. i also know that if i back out, it would be devastating to howard and alan, and 37 employees who work there. i don't think they can survive.
it's a very tough dilemma. alan, howard? >> hello, marcus. >> hey, guys, how are you? >> hey, marcus. >> thanks for coming back. >> good seeing you. >> glad to see ya. >> good to see you. look, guys, i thought about what's happening here. i normally, in a situation like this, when the numbers are wrong, completely wrong, i would normally just walk away. but there's too much history. there are too many employees. you guys have too much at risk. and i'm not gonna let the bank take it from you. >> both: thank you very much. >> we appreciate that. thank you. >> i'm gonna help you as much as i can, but i'm not gonna invest what i said i was gonna invest. i wanna make sure that i'm clear about that. >> but we need money to make payroll and for our working capital. that's--that's very important at this point, 'cause we wanna be here tomorrow.
>> and how much do you need? >> about 200,000. >> you know, i can't just give you the money. i can't just write you a check and give you a gift, as much as i like you guys. you know, i'm not a consultant. i do things to save jobs and to make money. i don't just kind of hand money out. and so, in order for me to give you that money, i'm gonna need to get a return on my money. and the only thing that i could think of is that i buy brooklyn burger from you. and i'll repackage it. and i'll get it back on its feet. >> we're willing to do whatever it takes. but with your guidance now, i think that, um--that things will work out much, much better. >> okay. >> and i think we can make money. >> we--no, no. >> we will make money. >> you will make money. my hope is that brooklyn burgers can start turning a profit quickly and pay down the debt. we got a lot of work to do. >> oh, yes, we do. >> let's get to work. now my money's not fully invested in stein meats, but
i am. we'll get this company back on its feet. deals can sometimes take unexpected turns, but last year i invested in a used car buying business that was about to go belly-up. >> i'm dangerously low on cash right now, which means i can't buy cars. >> my job's on the line. >> it's been seven months since we did the deal... change is coming. and i have a great story to share. >> the business in dire straits before marcus came. >> well, how much are you making now? >> ooh. >> for business advice and extra scenes from the show, go on to cnbc.com/the-profit. is built for business. built for your company. your customers. your... sales department built from the ground up.
for fast downloads. fast uploads. for a... built for tablets. for laptops. for... this. built for saving money. built for saving time. built for architects. built for... sign up for internet and voice and find out how to get four weeks of internet for free. comcast business. built for business. i'm bethand i'm michelle. and we own the paper cottage. it's a stationery and gifts store. anything we purchase for the paper cottage goes on our ink card. so you can manage your business expenses and access them online instantly with the game changing app from ink. we didn't get into business to spend time managing receipts, that's why we have ink. we like being in business because we like being creative, we like interacting with people. so you have time to focus on the things you love. ink from chase. so you can. at any minute... ...you could be a victim of fraud. most people don't even know it.
fraud could mean lower credit scores, higher mortgage rates... ...and not getting the home you really want. it's a problem waiting to happen. check your credit score, check your credit report, at experian.com. america's number one provider of online credit reports and scores. don't take chances. go to experian.com. so ally bank really has no hthat's right, no hidden fees.s? it's just that i'm worried about, you know, "hidden things." ok, why's that? well uhhh... surprise!!! um... well, it's true. at ally there are no hidden fees. not one. that's nice. no hidden fees, no worries. ally bank.
who owned car cash, a struggling auto buying business in midtown, manhattan. >> i'm dangerously low on cash right now, which means i can't buy cars. >> when their father died in 2012, the brothers andrew and jon took over. but their sales slowed, their profits evaporated, and their relationship grew strained. >> i'm sick of this [bleep]. are you out of your mind? there's no [bleep] way. >> i'll do anything to fix this business. >> the business was $200,000 in debt. no cash to buy cars, they were weeks away from closing. >> my job's on the line. >> but i knew it had potential to make a lot of money. so when you take my check, for the next week i'm 100% in charge, which means what i say goes. because change is coming. so i made a deal and invested $200,000 for 100% of car cash. jon and andrew are licensees of mine. you guys will share in a percentage of those profits without having to put up a dime or do a day's worth of work. i fixed their car buying process. point out the defects with the car. "you can get this replaced. it costs 300 or 400 bucks." make sense?
>> i like that. >> and i increased their margins by eliminating wholesalers. >> this is new york city. this is my [bleep] town. >> the wholesalers have to go. they go or i go. and i spent another $350,000 to renovate their location. this whole place is getting redone. let's go, guys. hit it like you meant it, though. >> to say that this is a transformation is an understatement. >> today, car cash is making over $10,000 a month. and the brothers are making money for the first time in years. and andrew and jon just opened a second car cash location in new jersey. hey, guys. >> hey, marcus. >> how are you? >> good to see you. >> place looks busy. >> yeah, it's very busy. >> and the brothers are now working as a team. and how about--is jon-- is he still beating on you? >> a little bit here and there. >> yeah, right? >> he's still my little brother. i'm actually in the process of opening three other locations. >> he's definitely embraced the process, and we're better for it. >> the business was actually in dire straits before marcus came. after marcus came, business
increased substantially, and the profits margins increased as well. >> well, you were making about $1,000 a car before. how much are you making now per car? >> 2,000 now. >> wow. to date, i've invested over a million dollars into this business. now i'm taking the car cash brand, and opening up locations all over the country. >> where do i get started? what do i gotta do? i'm interested. >> we have 70 locations, a national 1-800 number. and our brand, 1-800 car cash, is quickly becoming one of the largest auto buying services in america. we're even the national car buying service of nascar. well, guys, i'm really proud of you. >> thanks, marcus. >> you've made a lot of strides in a short period of time. >> i just wanna thank you for everything that you've done for us, for the business. you really saved us. and you gave us hope. and it means a lot to me, personally. >> i wish you a lot of luck. and, you know, i'll be around if you need me, okay? >> yeah.
>> the following is a cnbc original. >> come along on a ride with us. we're about to take you to a place unlike any other... >> let's go. >> all right. >> ...where marijuana is legal, and the scent of money is in the air. >> first time i've smoked a joint in a long time. >> go ahead and take it easy. it hits really smooth. >> and i no longer have to feel like a criminal. >> that's right. >> i'm not doing anything wrong. >> kevin and rachel are pot tourists, oh, so happy to be a mile high. >> welcome to colorado. >> in colorado today, the start of a brand-new industry.